What personal finance measures, and the number it has never asked for

Twenty-two ratios

In 1996 a panel of 156 experts, 85 financial planners and 71 educators, was asked to agree on the ratios that measure a household's financial health. They settled on twenty-two, in seven areas, with benchmarks for twenty.¹ Liquid assets should be at least two and a half months of expenses. Savings at least 10 percent of gross income. Housing at most 30 percent of gross income for a renter, 35 for an owner. Non-mortgage debt payments at most 15 percent of after-tax income, with 20 percent as the danger point.¹

Read all twenty-two and one thing is missing. Not one has a fee, a premium, a commission or a payout in its numerator or its denominator.¹ The ratios measure the household against itself. They do not measure the household against anyone it pays.

Ten feelings

In 2015 the federal consumer regulator published a definition of financial well-being and a ten-question scale to measure it. Financial well-being is "a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life".² The ten questions are all about how the respondent feels: "I am just getting by financially", "I have money left over at the end of the month", "My finances control my life". None asks about a price, a fee or a product.²

Three questions

The most quoted measure of financial literacy in the world is three questions, first fielded in a 2004 survey of older Americans. Does $100 at 2 percent for five years grow to more than $102, exactly $102, or less? If savings earn 1 percent and inflation is 2 percent, can you buy more, the same or less after a year? Is a single company's stock usually safer than a stock mutual fund?³ In 2009, 30 percent of American adults answered all three correctly.³ The questions test compounding, real return and diversification. They do not ask anything about a price, a fee or a seller.³

The textbooks and the standards

The standard college textbook of 2001 taught commission rates, fee-only against commission advisers, loads, 12b-1 fees and a section on hidden fees. It did not contain the phrase "loss ratio", "markup" or "expense ratio".⁴ The 2021 national standards ask twelfth-graders to compare fund expense ratios. They do not contain "conflict of interest", "fiduciary", "loss ratio" or "markup".⁵ Texas teaches the annual percentage rate. Florida's thirteen topics name no fee.⁵ Insurance is defined in the 2013 standards as "paying a fee now to avoid the possibility of a larger loss later", and no standard asks what fraction of the fee comes back.⁵

So the field does teach prices, where a price is disclosed. What it has never taught, in the standard textbooks, the two national standards, the twenty-two ratios or the ten-item scale, is what the price contains: what the insurer pays back against what it collects, what the lender charges against what the money costs it, what the fund manager keeps, and the sum of all of those for one household in one year.

The number nobody keeps

Even the regulator that could compute it does not. The federal consumer bureau's 2025 report on credit cards totals $160 billion of interest and $31.3 billion of fees paid in 2024. A footnote says its data "do not permit consumer-level cost reporting".⁶ The country knows what all households paid to card issuers last year. No household can find out what it paid.

Why the measurement was never made

The founders, the funders and the bestsellers all lead here. A field founded by lenders, funded by insurers and card issuers, and written by the sellers' side has produced a body of measurement that looks only in one direction: at the household's behavior. Save more, borrow less, diversify, compare the disclosed price. Every one of those is good advice. And none of them is the number the household would ask for first if it were the one paying for the field: what did I give the people I dealt with, and what did I get back?

That is the number Personal Economics exists to produce, and the reason it needed a name of its own.